<PAGE>
                                                                   EXHIBIT 10.7


                          FORM OF EMPLOYMENT AGREEMENT


         This Employment Agreement (this "Agreement") is made as of the ___ day
of ____________, 2004 (the "Effective Date"), by and between Texas United
Bancshares, Inc. (hereinafter called the "Employer") and Riley C. Peveto
(hereinafter called the "Executive"), an individual who resides in Fort Worth,
Texas.

         WHEREAS, the Board of Directors of the Employer (the "Board") has
proposed a merger between Employer and GNB Bancshares, Inc., ("GNB Bancshares")
such that GNB Financial, n.a. ("GNB Bank"), a wholly-owned subsidiary of GNB
Bancshares, will become a wholly-owned subsidiary of Employer;

         WHEREAS, the Board believes it is in the best interest of the Employer
to enter into this Agreement in order to attempt to assure management
continuity of GNB Bank; and

         WHEREAS, the parties desire to enter into this Agreement setting forth
the terms and conditions of the employment relationship between the Employer
and the Executive as set forth herein;

         NOW, THEREFORE, the parties, intending to be legally bound, for the
consideration set forth in this Agreement and for other good and valuable
consideration, agree as follows:

         1. EMPLOYMENT. Employer agrees to employ the Executive as Chairman of
the Board of GNB Bank, and Executive Vice President of Employer. Additionally,
Employer shall nominate or appoint the Executive to be a member of the Board of
Employer. The Executive shall have responsibilities, duties and authority
customarily accorded to and expected of an executive holding such position. The
Executive agrees to devote full time, attention and efforts to promote and
further the business of the Employer. The Executive shall report to the Board
and shall perform his duties under this Agreement in accordance with such
reasonable standards established from time to time by the Board.

         2. COMPENSATION AND BENEFITS. For all services rendered by the
Executive to the Employer and its subsidiaries, the Employer shall compensate
the Executive as follows:

            (a) Base Salary. Commencing the Effective Date, the Employer agrees
         to pay the Executive a base salary of $275,000 per annum, less
         applicable statutory deductions (the "Base Salary"), payable on a
         regular basis in accordance with the Employer's standard payroll
         procedures, but not less frequently than monthly. The amount of Base
         Salary shall be reviewed by the Board no less often than annually and
         may be increased from time to time by such amounts as the Board in its
         discretion may decide.

            (b) Benefits. Executive shall be entitled to coverage, subject to
         contributions required of executives of the Employer generally, for
         the Executive and dependent family members under health,
         hospitalization, disability, dental, life and other insurance plans
         that the Employer may have in effect from time to time for the benefit
         of similarly situated employees of the Employer. Employer expressly
         agrees that GNB Bank shall

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         maintain the existing life insurance policy for the Executive which
         provides a death benefit in the amount of $750,000.00 and that GNB
         Bank and/or its successors shall pay the entire premium associated
         with such policy.

            (c) Reasonable Executive Expenses. The Executive shall be eligible
         to participate in any fringe benefit plan or program which may be or
         become applicable to the Employer's executive employees, which shall
         include use of an automobile, a reasonable expense account, the
         payment of expenses related to club memberships (including initiation
         fees, annual dues and monthly fees and charges) the payment of
         reasonable expenses for attending annual and periodic meetings of
         trade associations, and any other benefits which are commensurate with
         the fringe benefits provided to similarly situated executive employees
         of Employer. The Executive shall be entitled to receive prompt
         reimbursement for all reasonable expenses incurred by him (in
         accordance with the policies and practices of the Employer or as may
         be established by the Board for its senior executives) in performing
         services under this Agreement, provided that the Executive properly
         accounts for such expenses in accordance with the Employer's policies.

            (d) Vacation. The Executive shall be entitled to annual vacation
         time determined in accordance with the Employer's standard practices,
         and equal to the vacation time granted other similarly situated
         executive employees of Employer.

            (e) Fort Worth Office. Employer shall continue to maintain the
         executive office of GNB in Fort Worth, Texas from which the Executive
         will provide services to Employer and its subsidiaries.

         3. TERM, TERMINATION AND RIGHTS UPON TERMINATION.

            (a) Term. The term of this Agreement shall begin on the Effective
         Date and continue for three (3) years (the "Term") unless terminated
         sooner as herein provided, and such Term shall be automatically
         extended to a period of three (3) years commencing on each anniversary
         of the Effective Date (except for any such anniversary occurring after
         the Executive's termination in accordance with this Agreement) on the
         same terms and conditions contained herein in effect as of the time of
         renewal, unless either party delivers written notice to the other of
         its intention not to renew this Agreement at least ninety (90) days
         prior to any such anniversary date. This Agreement and the Executive's
         employment may be terminated in any one of the following ways:

            (b) Termination as a Result of the Executive's Death. The death of
         the Executive shall immediately terminate this Agreement, and the
         Executive's estate shall be entitled to a lump sum cash amount
         representing all compensation and benefits earned by the Executive and
         unpaid as of the date of termination, less applicable statutory
         deductions, and any other benefits under insurance programs and other
         employee plans in accordance with the terms of such arrangements.

            (c) Termination on Account of Disability. If, as a result of
         incapacity due to physical or mental illness or injury, the Executive
         shall have been absent from his full-time duties hereunder for six (6)
         consecutive months, and the Employer has in effect


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         disability insurance for the Executive with coverage at least as
         beneficial to the Executive as is currently provided to the Executive
         by GNB, the Employer may terminate the Executive's employment provided
         Executive is unable to resume his full-time duties with reasonable
         accommodation, and the Executive shall be entitled to a lump sum cash
         amount representing all compensation and benefits earned by the
         Executive and unpaid as of the date of termination, less applicable
         statutory deductions, and any other benefits under insurance programs
         and other employee plans in accordance with the terms of such
         arrangements.

            (d) Termination by the Employer for Cause. The Employer may
         terminate this Agreement for "Cause," which shall mean: (i) the
         Executive's acts of dishonesty; (ii) the Executive's acts of willful
         misconduct; (iii) the Executive's acts that breach his fiduciary
         duties to the Employer (or any subsidiary); or (iv) the Executive's
         acts which breach his obligations pursuant to this Agreement. Prior to
         termination for "Cause," the Employer shall (i) provide the Executive
         with written notice describing in detail the actions taken by the
         Executive and the reasons why Employer believes that such actions
         constitute "Cause," (ii) afford the Executive with the opportunity to
         attend a meeting of the entire Board of Employer at which he may make
         a presentation challenging the Employer's determination that "Cause"
         exists, which meeting shall not occur until 10 business days after
         Executive receives the written notice, and (iii) if, after such
         meeting, the Employer continues to believe that "Cause" exists, give
         Executive thirty (30) days to cure the basis for the Employer's
         determination that "Cause" exists. If the basis for the Employer's
         determination that "Cause" exists has not been cured within such 30
         day period, or if not practicable to be cured within 30 days, the
         Executive has not made reasonable efforts to cure, then Employer may
         terminate this Agreement for "Cause" by giving written notice of
         termination to the Executive, specifically stating the grounds upon
         which the termination is based.

            (e) Termination Without Cause. At any time after the commencement
         of employment, either the Executive or the Employer may, voluntarily
         or without Cause, respectively, terminate this Agreement and the
         Executive's employment, effective thirty (30) days after written
         notice is provided to the other.

         4. CHANGE IN CONTROL. A Change in Control shall not occur by reason of
any transaction in which the Executive, or a group of individuals or entities
including the Executive, participates as an Acquiring Person, or owns, directly
or indirectly, a majority of a corporation described in this paragraph.

            (a) Definition of Change in Control. For purposes of this
         Agreement, "Change in Control" shall mean:

                (i) any "person" (as such term is used in Sections 13(d) and
         14(d) of the Securities Exchange Act of 1934, as amended (the
         "Exchange Act"), an "Acquiring Person") becomes the "beneficial owner"
         (as such term is defined in Rule 13d-3 promulgated under the Exchange
         Act, a "Beneficial Owner"), directly or indirectly, of securities of
         the Employer representing 50% or more of the combined voting power of
         the Employer's then outstanding securities;


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                (ii) the Employer's stockholders approve an agreement to merge
         or consolidate the Employer with another corporation (other than a
         corporation 50% or more of which is controlled by, or is under common
         control with, the Employer) in which the Employer is not the surviving
         entity;

                (iii) the Employer sells 80% or more of its assets to an
         Acquiring Person; or

                (iv) the persons who were members of the Board of Directors of
         the Employer immediately prior to a tender offer, exchange offer,
         contested election, or any combination of the foregoing, cease to
         constitute a majority of the Board of Directors.

            (b) Effect of Change in Control. In the event the Executive's
         employment is terminated by the Employer without Cause, or by the
         Executive for any reason, within one (1) year following a Change in
         Control, the Executive shall be entitled to the following:

                (i) A lump sum cash amount representing all compensation and
         benefits earned by the Executive and unpaid as of the date of
         termination, less applicable statutory deductions, to be paid within
         thirty (30) days of termination;

                (ii) A lump sum cash amount equal to three (3) times the
         Executive's annual base salary at the highest rate earned by him at
         any time during the twelve (12) months immediately preceding the date
         of determination; provided, however, that such payment shall be
         limited to an amount that, when added to all other amounts to be
         received by the Executive from the Employer that could constitute
         "parachute payments" (as defined in Section 280G(b)(2) of the Internal
         Revenue Code of 1986, as amended (the "Code")), shall not exceed one
         dollar ($1.00) less than three (3) times the Executive's "base amount"
         (as defined in Section 280G of the Code), so that no portion of such
         amounts shall constitute a non-deductible payment under Section 280G
         of the Code.

                (iii) The Employer shall maintain in full force and effect for
         the Executive's continued benefit: all life, medical, dental and
         prescription drug insurance plans, programs or arrangements in which
         the Executive was entitled to participate at any time during the
         twelve (12) month period prior to the date of termination, provided
         that the Executive's continued participation is possible under the
         general terms and provisions of such plans, programs or arrangements,
         until the earlier of the expiration of eighteen (18) months after
         termination, or the Executive's commencement of full time employment
         with a new employer. The Executive shall pay all premiums associated
         with the level of coverage elected by the Executive.

                (iv) The Employer shall reimburse to the Executive the cost, in
         an amount not to exceed 10% of the Executive's annual base salary, of
         professional out-placement services rendered to the Executive within
         six (6) months following termination of the employment of the
         Executive as and when such costs are incurred.


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         5. TERMINATION WITHOUT CAUSE OR EXECUTIVE TERMINATION FOR GOOD REASON.

            (a) If, at any time during the Term other than the one-year period
         following a Change in Control, the Executive is terminated by the
         Employer without Cause or the Executive terminates this Agreement for
         Good Reason (as defined below), the Executive shall be entitled to
         continuation of the Base Salary (or a lump sum payment, at Employer's
         option), less applicable statutory deductions, plus all of the fringe
         benefits provided to the Executive at the time of termination,
         expressly including, without limitation, the life insurance policy set
         forth in Paragraph 2(b) and the maintenance of the Fort Worth office
         set forth in Paragraph 2(e), for the remainder of the Term and
         continued participation in all life, medical, dental and prescription
         drug insurance plans, programs or arrangements in which the Executive
         was entitled to participate prior to the date of termination, until
         the expiration of the Term or the Executive begins full-time
         employment with a new employer. The Employer shall pay all premiums
         associated with the level of coverage elected by the Executive.

            (b) For purposes of this Agreement, the Executive shall have "Good
         Reason" to terminate this Agreement and his employment hereunder if,
         without the Executive's prior written consent, (i) the Executive is
         demoted by means of a reduction in authority, responsibilities, duties
         or title to a position of materially less stature or importance within
         the Employer than as described in Paragraph 1 hereof; (ii) the
         Employer breaches this Agreement in any material respect and fails to
         cure such breach within ten (10) days after the Executive delivers
         written notice and a written description of such breach to the
         Employer, which notice shall specifically refer to this paragraph of
         this Agreement; (iii) the Employer reduces the Executive's Base Salary
         or materially reduces his benefits; or (iv) Executive is subject to
         reporting to any officer other than the President and Chief Executive
         Officer of Employer.

         6. TERMINATION FOR CAUSE. In the event the Executive's employment is
terminated by the Employer for Cause, the Executive shall be entitled to a lump
sum cash amount representing all compensation and benefits earned by the
Executive and unpaid as of the date of termination, less applicable statutory
deductions, to be paid within six (6) days of termination.

         7. NON-DISCLOSURE, NON-COMPETITION AND NON-SOLICITATION COVENANTS

            (a) Confidential Information Defined. The Executive acknowledges
         that Employer's business is highly competitive, that he will be given
         immediate access to Confidential Information of Employer that is a
         valuable, special, and unique asset used by Employer in its business,
         and that protection of such Confidential Information against
         unauthorized disclosure and use is of critical importance to Employer.
         "Confidential Information" of Employer (or any subsidiary) means and
         includes confidential and/or proprietary information and/or trade
         secrets that have been and/or will be developed or used and that
         cannot be obtained readily by third parties from outside sources.
         Confidential Information includes, but is not limited to, the
         following: information regarding customers, employees, contractors and
         the industry not generally known to the public; strategies, methods,
         books, records and documents; technical information concerning
         products, equipment, services and processes; procurement procedures,
         pricing and pricing techniques; information concerning past, current
         and prospective customers,


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         investors and business affiliates (such as contact name, service
         provided, pricing, type and amount of services used, financial data
         and/or other such information); pricing strategies and price curves;
         positions; plans or strategies for expansion or acquisitions; budgets;
         research; financial and sales data; trading methodologies and terms;
         communications information; evaluations, opinions and interpretations
         of information and data; marketing and merchandising techniques;
         electronic databases; models; specifications; computer programs;
         contracts; bids or proposals; technologies and methods; training
         methods and processes; organizational structure; personnel
         information; payments or rates paid to consultants or other service
         providers; and other such confidential or proprietary information.

            (b) Non-Disclosure Obligations. The Executive agrees that he will
         not, at any time during or after his employment with Employer, make
         any unauthorized disclosure, directly or indirectly, of any
         Confidential Information of Employer, its subsidiary, or of any third
         parties that the Executive received in connection with his employment
         with Employer, or make any use thereof, directly or indirectly, except
         in working for Employer. The Executive also agrees that he shall
         deliver promptly to Employer at the termination of employment or at
         any other time at Employer's request, without retaining any copies,
         all documents and other material in the Executive's possession
         relating, directly or indirectly, to any Confidential Information or
         other information of Employer, or Confidential Information or other
         information regarding third parties, learned as an employee at
         Employer.

            (c) Non-Competition Obligations. In order to protect the
         Confidential Information and in order to enforce Employee's agreement
         not to disclose Confidential Information, Employer and Executive agree
         that, during the term of the Executive's employment with Employer,
         which may exceed the Term of this Agreement, and for twelve (12)
         months after the termination of the Executive's employment with
         Employer ("Non-Competition Period"), the Executive will not, except as
         an employee of Employer, in any capacity for the Executive or others,
         directly or indirectly:

                (i) compete or engage, anywhere in the geographic area
         comprised of Cooke, Denton and Ellis Counties plus any additional
         county in which GNB Bank may establish a branch office (the "Market
         Area"), in a business similar to that of Employer, or compete or
         engage in that type of business which Employer has plans to engage in,
         or any business which Employer has engaged in during the preceding
         twelve (12) month period if within the twelve (12) months before the
         termination of the Executive's employment, the Executive had access to
         or knowledge regarding the proposed plans or the business in which
         Employer engaged;

                (ii) take any action to invest in, own, manage, operate,
         control, participate in, be employed or engaged by or be connected in
         any manner with any partnership, corporation or other business or
         entity engaging in a business similar to that of Employer anywhere
         within the Market Area; except that the Executive is permitted to own,
         directly or indirectly, up to five percent (5%) of the issued and
         outstanding securities of any publicly traded financial institution
         conducting business in the Market Area;


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               (iii) call on, service or solicit competing business from
         customers or prospective customers of Employer if, within the twelve
         (12) months before the termination of the Executive's employment, the
         Executive had or made contact with the customer, or had access to
         information and files about the customer; or

                (iv) call on, solicit or induce any employee of Employer whom
         the Executive had contact with, knowledge of, or association with in
         the course of employment with Employer to terminate employment from
         Employer, and will not assist any other person or entity in such
         activities.

            (d) Injunctive Relief. Employer and the Executive acknowledge and
         agree that breach of any of the covenants made by the Executive in
         this Paragraph 7 would cause irreparable injury to Employer, which
         could not sufficiently be remedied by monetary damages; and,
         therefore, that Employer shall be entitled to obtain such equitable
         relief as declaratory judgments; temporary, preliminary and permanent
         injunctions; and order of specific performance to enforce those
         covenants or to prohibit any act or omission that constitutes a breach
         thereof. If a party must bring suit to enforce this Agreement or to
         defend any such action, the prevailing party shall be entitled to
         recover its attorneys' fees and costs related thereto.

            (e) Tolling. In the event that Employer shall file a lawsuit in any
         Court of competent jurisdiction alleging a breach of any of the
         Executive's obligations under this Agreement, any time period the
         Executive is in breach of the Agreement shall be deemed tolled as of
         the time such lawsuit is filed, and shall remain tolled until such
         dispute finally is resolved.

         8. RETURN OF EMPLOYER PROPERTY. All records, designs, patents,
business plans, financial statements, manuals, memoranda, lists, contracts and
other property delivered to or compiled by the Executive by or on behalf of the
Employer or their representatives, vendors or customers which pertain to the
business of the Employer (including any subsidiary) shall be and remain the
property of the Employer and subject at all times to its discretion and
control. Likewise, all correspondence, reports, records, charts, advertising
materials and other similar data pertaining to the business, activities or
future plans of the Employer which is collected by Executive during the course
of his employment with the Employer shall be delivered promptly to the Employer
without request by it upon termination of Executive's employment.

         9. INVENTIONS. Executive shall disclose promptly to the Employer any
and all significant conceptions and ideas for inventions, improvements and
valuable discoveries, whether patentable or not, which are conceived or made by
the Executive, solely or jointly with another, during the period of employment
or within one (1) year thereafter, and which are directly related to the
business or activities of the Employer and which the Executive conceives as a
result of his employment hereunder. The Executive hereby assigns and agrees to
assign all his interests therein to the Employer or its nominee. Whenever
requested to do so by the Employer, the Executive shall execute any and all
applications, assignments or other instruments that the Employer shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Employer's interest therein.


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         10. TRADE SECRETS. The Executive agrees not to, during or after the
term of this Agreement, directly or indirectly, disclose (or use for the
benefit of any person other than the Employer) the specific terms of the
Employer's (including any subsidiary) relationships or agreements with their
respective significant vendors or customers or any other trade secret or other
confidential business information of the Employer (including any subsidiary),
whether in existence or proposed, to any person, firm, partnership, corporation
or business for any reason or purpose whatsoever, except and only to the extent
(i) such information is or becomes known to the public generally through no
fault of the Executive or (ii) required by law or legal process following
notice to the Employer.

         11. ARBITRATION. Any unresolved dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively by
arbitration, conducted before a panel of three (3) arbitrators in the state in
which the Employer's main office is located, in accordance with the Employment
Dispute Resolution Rules of the American Arbitration Association ("AAA") then
in effect, provided that the Executive and the Employer shall comply with the
Employer's grievance procedures in an effort to resolve such dispute or
controversy before resorting to arbitration, and provided further that the
parties may agree to use arbitrators other than those provided by the AAA. The
arbitrators shall not have the authority to add to, detract from, or modify any
provision hereof nor to award punitive damages to any injured party. A decision
by a majority of the arbitration panel shall be final and binding. Judgment may
be entered on the arbitrators' award in any court having jurisdiction. The
direct expense of any arbitration proceeding shall be apportioned by the
arbitration award.

         12. SUCCESSOR; BINDING AGREEMENT. The Employer shall require any
successor (whether direct or indirect, by purchase, merger, consolidation,
liquidation or otherwise) to all or substantially all of the business and/or
assets of the Employer to agree to assume and to assume all of the obligations
of the Employer under this Agreement upon or prior to such succession taking
place. A copy of such assumption and agreement shall be delivered to Executive
promptly after its execution by the successor. However, this Agreement is
personal to the Executive and the Executive may not assign or transfer any part
of his rights or duties hereunder, or any compensation due to him hereunder, to
any other person, except that this Agreement shall inure to the benefit of and
be enforceable by the Executive's personal or legal representatives, executors,
administrators, heirs, distributees, devisees or beneficiaries.

         13. MODIFICATION; WAIVER. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in a writing signed by the Executive and by such director of the
Employer as may be specifically designated by the Board. Waiver by any party of
any breach of or failure to comply with any provision of this Agreement by the
other party shall not be construed as, or constitute waiver of such provision,
or a waiver of any other breach of, or failure to comply with, any other
provision of this Agreement.

         14. NOTICE. All notices, requests, demands and other communications
required or permitted to be given by either party shall be in writing, deemed
to have been given when delivered personally or received by certified or
registered mail, return receipt requested, postage prepaid, at the address of
the other party as follows:


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<PAGE>

         If to the Employer to:

                                    Texas United Bancshares, Inc.
                                    202 West Colorado Street
                                    La Grange, Texas 78945

         If to Executive to:

                                    Riley C. Peveto
                                    2321 Medford Ct. East
                                    Fort Worth, Texas 76109

Either party hereto may change its address for purposes of this Paragraph 14 by
giving fifteen (15) days prior notice to the other party hereto.

         15. GOVERNING LAW. This Agreement has been executed and delivered in
the State of Texas, and its validity, interpretation, performance and
enforcement shall be governed by the laws of that State.

         16. COMPLETE AGREEMENT. This Agreement sets forth the entire agreement
of the parties relating to the subject matter hereof, and supersedes any other
employment agreements or understandings, written or oral, between the Employer,
its predecessors and the Executive. The Executive has no oral representations,
understandings or agreements with the Employer or any of its officers,
directors or representatives covering the same subject matter as this
Agreement. This Agreement is the final, complete and exclusive statement and
expression of the agreement between the Employer and the Executive and of all
the terms of this Agreement, and it cannot be varied, contradicted or
supplemented by evidence of any prior or contemporaneous oral or written
agreements.

         17. SEVERABILITY. If any portion of this Agreement is held invalid or
inoperative, the other portions of this Agreement shall be deemed valid and
operative and, so far as is reasonable and possible, effect shall be given to
the intent manifested by the portion held invalid or inoperative.



SIGNATURE PAGE FOLLOWS


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                                          EMPLOYER:

                                          Texas United Bancshares, Inc.
                                          202 West Colorado Street
                                          La Grange, Texas 78945


                                          By:
                                                  -----------------------------
                                          Name:
                                                  -----------------------------
                                          Title:
                                                  -----------------------------



                                          EXECUTIVE:

                                          Riley C. Peveto
                                          2321 Medford Ct. East
                                          Fort Worth, Texas 76109


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